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spk00: Greetings. Welcome to InspireMD third quarter 2021 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to David Holmes with LifeSci Advisors. Thank you. You may begin.
spk03: Thank you, Shari, and good morning, everyone. Thank you for joining us for the InspireMD third quarter 2021 financial results and corporate update conference call. Joining us today from InspireMD are Marvin Flossman, Chief Executive Officer, and Craig Shore, Chief Financial Officer. During this call, management will be making forward-looking statements, including statements that address InspireMD's expectations for future performance and operational results, particularly in light of the COVID-19 pandemic. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in InspireMD's most recently filed periodic reports on Form 10-K and Form 10-Q filed with the U.S. Securities and Exchange Commission and InspireMD's press release that accompanies this call, particularly the cautionary statements made in it. This call contains time-sensitive information that is accurate only as of today, November 9th, 2021. Except as required by law, InspireMD disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. It is now my pleasure to turn the call over to Marvin Sussman, Chief Executive Officer. Marvin, please go ahead.
spk02: Thank you, David. Good morning and thank you all for joining the third quarter 2021 call. Also joining me today is Craig Shore, our Chief Financial Officer. I'd like to begin with the reiteration of our mission at InspireMD, which is to establish Seaguard APS as the standard of care solution to change the way carotid artery disease is managed and strokes are prevented. The Seaguard carotid stent system enables this change through its unique design and proprietary Micronet mesh protection. which has yielded an unmatched and growing body of clinical evidence in real-world practice as well as ongoing clinical studies. We serve equally all physician specialists treating carotid artery disease with focus on the stent system and patient outcomes. We create greater awareness of the advantages of C-Guard as a first-line option to a broad physician base as well as advanced new delivery systems and accessory solutions We believe we can enable the conversion of this surgically-dominated $5 billion global total addressable market to a less invasive endovascular standard of care. The third quarter of 2021 proved meaningful in our quest to deliver on our growing body of evidence, further differentiating C-Guard from all other first-generation and dual-layered stents in the market, with the publication in JAK of a randomized trial comparing C-Guard EPS against Abbott's first-generation open-celled Acculink. with clear differentiation and a statistically significant reduction of approximately 80% in periprocedural cerebral embolization in favor of Seaguard. We'll further discuss the results in this breakthrough publication later. Additionally, we continue to build market demand for Seaguard while gaining traction in our company objectives of global expansion, commercial growth, and development of pipeline offerings. Commercial business grew for the quarter 24% year-over-year in C-Guard sales, and for the nine months year-to-date, increased 45% over the same period in 2020. During the quarter, we sold 1,709 devices, an increase of 21% as compared to the third quarter of 2020, with scheduled procedures to normalize levels in most of our serve markets. In France, we've received the anticipated reimbursement approval to combine with our previously announced clinical approval for Sea Guard from the French National Authority for Health and have subsequently launched Sea Guard into the French market with 18 cases completed in the first week post-approval. These key commercial inflection points of expansion into new markets have also accelerated our plans to advance our direct sales efforts in selective strategic locations to capture higher average sales price and enable greater control of the sales process to drive growth, as we have demonstrated previously in the United Kingdom and now France. Our strategy in Asia continues with talks in Japan amongst distributor partners interested in representing SeaGuard. As we noted previously and consistent with our agreement in China several months ago, we believe the Asian market offers an accelerated opportunity for SeaGuard as the existing standard of care for procedural intervention is predominantly endovascular focused and less surgically dominated. Additionally, with the advanced enrollment in our C-Guardians FDA trial and greater U.S. physician experience with C-Guard, we're planning to establish a U.S. base of business, including addition of commercial leadership and operational infrastructure. Speaking of the U.S. C-Guardians trial, we've completed over 10% of the enrollment to date, led by our global principal investigator, Dr. Chris Metzger, at Ballad Health System in Eastern Tennessee. As we launched the trial in the U.S. with the top carotid stenting leaders, we're encouraged by the growing foundation of awareness and credibility through the utilization of C-Guard with investigator experience, positioning us for a successful and accelerated post-approval commercial launch. In reference to the prior mentioned publication of the randomized trial comparing C-Guard to the Abbott-Ackling stent, trial compared C-Guard EPS against the first-generation Abbott Aculink in a CAS-related ipsilateral cerebral embolism study measured by DWMRI following CAS and found a dramatic 4.5-fold reduction in periprocedural cerebral embolism in favor of C-Guard. Most significantly, this reduction in procedural events was reflected in both volume and number of lesions in favor of C-Guard, consistent with the Micronet-covered prevention, delivering cerebral protection both during and following casts. The ability of our Micronet mesh to prevent the migration of thrombus in the lumen of the vessel following casts remains the foundational advantage of C-Guard against all other stent alternatives, and this important publication adds further evidence to the advantages of our stent platform. Although the study was not powered to show statistical significance of clinical outcomes, there were two observed ipsilateral strokes which occurred in the Abbott AccuLink arm, but no neurological events occurred with the C-Guard arm, further suggesting the value of post-procedural protection from the Micronet mesh. Our investment in our pipeline of innovation continues with new advanced tools to enable more CAS procedures. Our progress with the previous mentioned new delivery systems continues with anticipated approval in 2022, which we believe will facilitate greater accelerated growth in overall global market demand and will significantly address the conversion of surgical procedures to endovascular . To summarize, the quarter reflects our priority of execution and growth, which will continue to drive our objective of establishing C-Guard carotid stent system as the foundational enabler of endovascular convergence from open surgery. We chart a new course for how CAD is managed and stroke is prevented with our clinically proven C-Guard EPS system, demonstrating superior clinical outcomes for patients compared to alternative carotid stent types, conventional or next generation double layer stents, as well as invasive surgical procedures such as endarterectomy. We're encouraged by our progress and mission as we continue to invest in our future to leverage and unlock their tremendous potential to change the way carotid artery disease is managed and stroke is prevented. With that, I'll turn the call over to Craig, who will review the first quarter financials. Craig.
spk01: Thank you, Marvin, and to everyone for joining today. Here are some key financial highlights for the third quarter and the September 30th, 2021. Total revenue for the quarter was $1,071,000, an increase of 9%. compared to $980,000 during the three months ended September 30th, 2020. Seaguard EPS had revenue of $1,031,000, an increase of 24% from $833,000 for the same period last year. This sales increase was mainly due to procedures with Seaguard EPS, which are generally scheduled for non-emergency cases, began this quarter to return to normal levels and additional territories as compared to the three months ended September 30th, 2020, when procedures with C-Guard EPS were still somewhat postponed as hospitals shifted resources to patients affected by COVID-19. This increase in sales of C-Guard EPS was partially offset by a decrease of 73% in sales of M-Guard EPS from $147,000 during the three months ended September 30th, 2020 to $40,000 during the three months ended September 30th, 2021. For the three months ended September 30th, 2021, we had a gross profit of $92,000 compared to $298,000 during the three months ended September 30th, 2020. This decrease in gross profit resulted from $136,000 increase in material and labor costs, mainly due to an increase in sales volume as well as a short-term increase in production costs per unit, an increase of write-offs of $66,000 due to component supply issues, A $57,000 increase in new employee training costs and an increase of $38,000 in miscellaneous expenses during the three months ended September 30th, 2021. This decrease was partially offset by $91,000 increase in revenue, mainly due to the increases in sales volume previously stated. Gross margin decreased to 9% during the three months ended September 30th, 2021. from 30 percent during the three months ended September 30, 2020, driven by the reasons just stated. Total operating expenses for the quarter ended September 30, 2021, were $4,123,000, an increase of 65 percent compared to $2,493,000 for the same period in 2020. This increase is primarily due to increases of $700,000 in expenses related to the commencement, the Sea Guardians FDA study, $400,000 in salary expenses and related accruals due to additional resources mainly in our product development and sales infrastructure, $151,000 in development expenses associated with SeaGuard EPS new delivery system and accessory solutions, $147,000 in share-based compensation, related to expenses due to the recognition of grants made from August 31, 2020, $102,000 in sales and marketing expenses associated with expansion of existing and new markets, $81,000 of directors and officers' liability insurance expense due to increased premiums caused by recent trends in the overall industry, and $41,000 in miscellaneous expense. Net loss for the third quarter of 2021 totaled $4,071,000, or 53 cents per basic and diluted share, compared to a net loss of $2,233,000, or 96 cents per basic and diluted share for the same period in 2020. The average amount of shares outstanding used for the earnings per share calculation were $7,739,463 in Q3 2021, and $2,325,619 in Q3 2020, both adjusted to reflect the 1 for 15 reverse split affected by us on April 26, 2021. As of September 30, 2021, cash, cash equivalents, and short-term bank deposits were $37.1 million, compared to $12.6 million as of December 31, 2020. With that, I'd like to now turn the call over for questions. Operator, please go ahead.
spk00: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Ben Hainer with Alliance Global Partners. Please proceed.
spk04: Good day, gentlemen. Thanks for taking the questions, and congrats on all the progress. First off for me, just on the Sea Guardians trial, can you talk a little bit about how the other sites are on track for opening enrollment? When do you expect all the sites to be up and running?
spk02: Yeah. Hi, Ben. Thanks for the question. So we have four sites currently that are approved and up and ready to enroll. The process, as you may be aware, is a bit complicated in terms of getting all the contracts in place and getting everything set. We plan to have another four sites completed by the end of the year. So in total, I think we'll be looking at somewhere around seven or eight sites total by the end of the year for enrollment purposes. So progressing during that process, and then it will be a part of going ahead and getting cases done.
spk04: Got it. And then on the Siberia data, that looked great, obviously. You know, have you gotten any feedback from clinicians since the publication that you can discuss?
spk02: Yeah, nothing solid other than the fact that, you know, it's a recent publication in Jack, and we certainly are trying to promote that in our commercial organization. Most recently, we just attended the TCT, and VEET is actually next week as well. So we're hopeful that both the outreach as well as just the overall absorption of this by the industry and by physicians will be very positive. And this was certainly an important trial and result for us because it was a randomized event head-to-head with the Abbott AccuLink stent. So we're really pleased with the information and look forward to using it to advance our storyline and clinical data.
spk04: Makes sense. You know, is there anything that surprised you coming out of that in terms of the performance? I mean, it looked pretty fantastic to me, but just curious on whether there's any surprise from your end.
spk02: Yeah, I think, Ben, the great part of the result is the fact that it continues to reinforce what we've observed from the very beginning. from the trials that have taken place, investigator-initiated trials. As you know, we've got about 1,500 patients enrolled in these efforts, and it just continues to reiterate the performance of C-Guard, just in a different context, head-to-head with AccuLink stent, but no surprises, which is actually quite good because it shows the consistency of performance of the stent in previous work as well.
spk04: Okay, that makes a lot of sense. And then you're up and running in France. Can you talk a little bit about what the ASPs look like there? I know you're at roughly $600 overall, but kind of where are those at in France? And then maybe talk a little bit more about the Asian opportunity as you see it developing.
spk02: Yeah, so the French market in terms of reimbursement is somewhere around $800 for reimbursement. in this particular category. Our objective there, obviously, was to go on a direct sales model for obvious reasons, which gives us the full benefit of the ASP, but also allows us to control the market. So in that particular case, it made good sense to make the transition to a direct sales effort in France. In terms of Asia, I think your second question was Asia. We've got three interested distributor partners in Japan right now, all of which... all of which are quite interested and are in the process of trying to sort out what is best in terms of our approach, which partner or relationship and so forth. But it's nice to have three very strong options in the Japanese market as it's a very significant play for us. So we're encouraged by that and we'll continue to negotiate the best option.
spk04: Got it. And then any other color that you can share on the two new delivery systems that you mentioned earlier?
spk02: Yeah, I'm anxious to talk about that. It's a little bit premature. We're just sort of rounding the edges in terms of regulatory strategy and pathway and commercial pathway, and I'm certainly hopeful that in the near future we're going to be able to talk more openly about what those delivery systems mean to our overall commercial strategy. But coming soon is the way I would frame that. We're making great progress.
spk04: Okay, stay tuned. I know it's one of my favorite questions. I want you to keep asking it.
spk02: Stay tuned. All right.
spk04: Excellent. Well, that's all I had, gentlemen. Thanks for taking the questions.
spk02: Thanks, Ben. We appreciate it.
spk00: There are no more questions at this time. I would like to turn the conference back over to Marvin Slussman for closing remarks.
spk02: Thanks very much. I'd like to thank everyone for taking the time to join the call today. Of course, InspireMD is fundamentally a stronger company today than ever before. We're really encouraged about our future, and I'm very proud of the extraordinary efforts of our expanding team and creating an exciting future for the company. Thank you.
spk00: Thank you. This does conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.
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